Himes: Too early to forget Dodd-Frank

Published 12:00 am, Saturday, July 25, 2015

Six years ago, when I first entered Congress, I was called to begin working on the details of the Dodd-Frank bill in the House Committee on Financial Services even before I really knew where to find the bathroom.

The stress was immense. While the “bailout” of 2008 appeared to have stabilized the failing banks, it was far too early to declare success. Emotions, including the rage that gave rise to both Tea Party and Occupy Wall Street, were running very high. That emotion was more than justified.

The financial collapse, which began in 2007, threatened the foundations of the American economy. Almost 9 million jobs disappeared. Millions of Americans saw their homes plummet in value, and millions others had their savings, investments, and pensions wiped out as stock market values were halved between October of 2007 and early 2009. Large financial institutions teetered on the brink.

Since then, we have slowly recovered. But this was not a natural recovery. It took the energy of a new president assuming office in 2009, and the courage of a Democratic Congress to invest in American families in the face of unyielding opposition by Republicans. Securing those hard-won gains would mean an overhaul of the of the wildly risky financial services industry.

Dodd-Frank, the five-year anniversary of which we celebrate this week, imposed tough new rules on a system that had privatized gains and socialized losses. It created a Consumer Financial Protection Bureau (CFPB) to enforce rules to defend Americans from fraud and curb the abuses of the worst actors in the market. It brought the derivatives market into the light of day for the first time, and gave the regulators unprecedented power to stop the use of derivatives for gambling. It gave regulators the tools and power to address “too big to fail,” a project that continues today as we face ever larger banking behemoths.

Regrettably, like so many other responses to the Great Recession, Dodd-Frank has been a target of unceasing attack since its creation. Its detractors, many of whom predicted perfectly incorrectly that it would quash job-growth and strangle credit markets, continue to push for its repeal or evisceration, often, ironically, in the name of “freedom.”

Since Dodd-Frank was signed into law, moer than 12 million new jobs have been created and financing markets are working. Consumer credit is up a third. The stock markets and venture capital investment have almost doubled. Commercial and industrial loans are up 60 percent. Unemployment is down. Confidence is growing. The willful forgetfulness of the critics is a threat to all of us and to our fragile recovery.

This is not to say Dodd-Frank is perfect. The mortgage and mortgage securitization markets still over-rely on public support, and there are concerning liquidity issues in certain corporate financing markets. Disconcertingly, there is no way to be sure if the supervision of mega-banks is adequate until one of them is truly stressed. But compared to the apocalyptic warnings of Dodd-Frank’s critics these are manageable issues.

It should be our constant work in Congress to fine-tune this legislation to comport with an ever-evolving economy and financial industry. Sen. Chris Dodd and Rep. Barney Frank, the lead authors of the bill, have both retired. The makeup of Congress is very different now than it was in 2010 when the bill passed. As an author of the bill who remains in Congress, I view it as my responsibility to continue the progress we have made over the past five years into the future.